Kemira Oyj, Interim Report, April 26, 2024 at 8.30 am (EEST)
Kemira Oyj's January-March 2024 Interim Report: Strong start to the year with a focused portfolio
This is a summary of the January-March 2024 Interim Report. The complete report with tables is attached to this release and available at kemira.com/investors.
First quarter:
Kemira divested its Oil & Gas (O&G)-related portfolio on February 2, 2024. All comparisons in this report are made to the comparison period, which includes the Oil & Gas related portfolio. Kemira's Q1 2024 figures include around EUR 45 million of revenue and around EUR 3 million of operative EBITDA from Oil & Gas. Kemira has also presented Oil & Gas divestment adjusted figures and performance in relevant parts of the report, which reflect the underlying business performance of Kemira's Pulp & Paper and Industry & Water segments. Kemira management follows the Oil & Gas divestment adjusted figures. The adjusted figures for the comparison period are also available in a separate stock exchange release published on February 9, 2024 and on kemira.com/investors. Kemira's outlook for 2024 includes the Oil & Gas-related portfolio until the closing date of the divestment, February 2, 2024.
Q1 2024 performance, unadjusted for Oil & Gas divestment
- Revenue decreased by 16% to EUR 763.3 million (906.0).
- Operative EBITDA decreased by 16% to EUR 162.5 million (192.6). The operative EBITDA margin was stable at a record-high level of 21.3% (21.3%). The operative EBITDA margin improved in the Industry & Water segment. EBITDA decreased by 16% to EUR 154.1 million (184.1). The differences between operative and reported figures are explained by items affecting comparability, which were mainly related to the divestment of Oil & Gas.
- Operative EBIT decreased by 17% to EUR 117.6 million (141.9). EBIT decreased by 18% to EUR 109.2 million (133.4).
- Cash flow from operating activities was strong at EUR 97.7 million (96.7).
- EPS (diluted) decreased by 19% to EUR 0.49 (0.60) mainly due to the divestment of Oil & Gas.
Q1 2024 performance, Oil & Gas divestment adjusted
- The Oil & Gas divestment adjusted revenue decreased by 10% to EUR 718.8 (795.6). Revenue in local currencies, excluding acquisitions and divestments, decreased by 9% mainly as sales prices for energy-intensive pulp and bleaching chemicals declined from an elevated comparison period. Sales volumes increased both year-on-year and sequentially. Sales prices were rather stable sequentially.
- The Oil & Gas divestment adjusted operative EBITDA decreased by 6% to EUR 159.2 (169.4) mainly as sales prices for energy-intensive pulp and bleaching chemicals declined from an elevated comparison period. The adjusted operative EBITDA margin was strong at 22.2% (21.3%).
- The Oil & Gas divestment adjusted operative EBIT decreased by 8% to EUR 114.4 (124.4).
Outlook for 2024 (unchanged)
Revenue
Kemira's revenue is expected to be between EUR 2,700 and EUR 3,200 million in 2024 (reported 2023 revenue: EUR 3,383.7 million).
Operative EBITDA
Kemira's operative EBITDA is expected to be between EUR 480 and EUR 580 million in 2024 (reported 2023 operative EBITDA: EUR 666.7 million).
Assumptions behind outlook (specified)
Kemira's end-market demand (in volumes) is expected to grow slightly in 2024 following expected gradual demand recovery in the pulp and paper market. The water treatment market is expected to remain steady in 2024. Input costs are expected to remain rather stable during the year. The outlook assumes no major disruptions to Kemira's manufacturing operations, supply chain or Kemira's energy-generating assets in Finland. There is uncertainty related to the political strikes in Finland and their implications on Kemira's customers and Kemira. Foreign exchange rates are expected to remain at approximately current levels. The outlook for 2024 includes the Oil & Gas business until February 2, 2024, the closing date of the divestment transaction.
Kemira's President & CEO, Antti Salminen:
"I had the honor to start as Kemira's President and CEO in mid-February. I have spent my first months in the role meeting our people and customers as well as taking a holistic look at Kemira's strategy. Kemira is in excellent shape, which provides a strong foundation to build on. We have a number of strengths: a solid strategy, a resilient business model, committed employees, high customer satisfaction and a very strong financial position. The recent divestment of Oil & Gas further strengthens our business model and reduces cyclicality. It also clarifies our strategy and confirms our commitment to sustainability. We will continue to focus on profitable growth with water, renewable solutions, and digital services as our priority areas. Going forward, we will increasingly concentrate on faster execution to deliver results. Together with our committed team, we are now reviewing our strategic initiatives and targets to see how we can accelerate their execution and create even more value for our shareholders.
Looking at the performance of the first quarter, we started the year strongly with our focused portfolio. Market demand continued to recover gradually and we saw volume growth both year-on-year and sequentially in both segments. Organic revenue growth was negative as sales prices for energy-intensive pulp and bleaching chemicals declined from an elevated comparison period. Profitability was very strong and the operative EBITDA margin was stable year-on-year at a record-high level of 21.3% during Q1 2024. We had strong margin performance in both segments driven by successful cost management and higher sales volumes. In absolute terms, our operative EBITDA reached EUR 162 million, a great achievement considering we closed the divestment of Oil & Gas in February. Cash flow was also very strong during the quarter. The proceeds from the Oil & Gas divestment further strengthened our balance sheet, which is currently record strong with net debt / operative EBITDA at 0.6.
The pulp and paper market continued to recover gradually during Q1 2024. However, the political strikes in Finland forced some of Kemira's pulp and paper customers in Finland to curtail production. The strikes had a limited impact on the Pulp & Paper segment's Q1 2024 performance, which was robust. Sales volumes increased both sequentially and year-on-year despite the political strikes in Finland. The segment's revenue declined to EUR 423 million as sales prices for energy-intensive pulp and bleaching chemicals declined from an elevated comparison period. Operative EBITDA margin was strong at 20.9%, which is an excellent achievement.
In Industry & Water, the water treatment market remained steady on both the municipal and industrial side. Kemira's Industry & Water segment continued its excellent performance during the quarter. Revenue was EUR 340 million, while the operative EBITDA margin reached a record-high of 21.8%. Kemira closed the divestment of Oil & Gas on February 2, 2024 and the positive impacts of the divestment were tangibly visible in our Q1 performance: improved operative EBITDA margin and return on capital employed.
Our Annual General Meeting held in March approved the Board of Director's dividend proposal of EUR 0.68 (2023: EUR 0.62) per share to be paid in two installments. The first installment was paid on April 4, 2024 and the second one will be paid early November. After a strong start to the year, we look at the remainder of 2024 with confidence. We have kept our outlook unchanged and continue to expect revenue to be between EUR 2,700 and EUR 3,200 million and operative EBITDA between EUR 480 and EUR 580 million."
KEY FIGURES AND RATIOS
| EUR million | Jan-Mar | Jan-Mar | Jan-Dec |
| 2024 | 2023 | 2023 | |
| Revenue | 763.3 | 906.0 | 3,383.7 |
| Revenue, O&G divestment adjusted | 718.8 | 795.6 | 2,889.0 |
| Operative EBITDA | 162.5 | 192.6 | 666.7 |
| Operative EBITDA, O&G divestment adjusted | 159.2 | 169.4 | 595.9 |
| Operative EBITDA, % | 21.3 | 21.3 | 19.7 |
| Operative EBITDA %, O&G divestment adjusted | 22.2 | 21.3 | 20.6 |
| EBITDA | 154.1 | 184.1 | 540.0 |
| EBITDA, % | 20.2 | 20.3 | 16.0 |
| Operative EBIT | 117.6 | 141.9 | 463.0 |
| Operative EBIT, O&G divestment adjusted | 114.4 | 124.4 | 415.5 |
| Operative EBIT, % | 15.4 | 15.7 | 13.7 |
| Operative EBIT %, O&G divestment adjusted | 15.9 | 15.6 | 14.4 |
| EBIT | 109.2 | 133.4 | 336.4 |
| EBIT, % | 14.3 | 14.7 | 9.9 |
| Net profit for the period | 79.0 | 95.4 | 211.3 |
| Earnings per share, diluted, EUR | 0.49 | 0.60 | 1.28 |
| Capital employed* | 2,092.9 | 2,244.5 | 2,155.5 |
| Capital employed*, O&G divestment adjusted | 1,874.2 | 1,904.7 | 1,856.0 |
| Operative ROCE*, % | 21.0 | 19.4 | 21.5 |
| Operative ROCE, %, O&G divestment adjusted | 21.6 | 20.8 | 22.4 |
| ROCE*, % | 14.9 | 18.7 | 15.6 |
| Cash flow from operating activities | 97.7 | 96.7 | 546.0 |
| Capital expenditure excl. acquisition | 26.2 | 29.1 | 204.9 |
| Capital Expenditure excl. Acquisitions, O&G divestment adjusted | 26.2 | 26.6 | 187.7 |
| Capital expenditure | 26.2 | 31.0 | 206.8 |
| Cash flow after investing activities | 178.9 | 66.5 | 349.3 |
| Equity ratio, % at period-end | 47 | 45 | 48 |
| Equity per share, EUR | 10.29 | 10.05 | 10.84 |
| Gearing, % at period-end | 23 | 45 | 32 |
*12-month rolling average
Unless otherwise stated, all comparisons in this report are made to the corresponding period in 2023.
Kemira provides certain financial performance measures (alternative performance measures) that are not defined by IFRS. Kemira believes that alternative performance measures followed by capital markets and Kemira management, such as revenue growth in local currencies, excluding acquisitions and divestments (=organic growth), EBITDA, operative EBITDA, operative EBIT, cash flow after investing activities, and gearing, provide useful information about Kemira's comparable business performance and financial position. Selected alternative performance measures are also used as performance criteria in remuneration.
Kemira's alternative performance measures should not be viewed in isolation from the equivalent IFRS measures, and alternative performance measures should be read in conjunction with the most directly comparable IFRS measures. Definitions of the alternative performance measures can be found in the definitions of the key figures in this report, as well as at www.kemira.com > Investors > Financial information. All the figures in this report have been individually rounded, and consequently the sum of the individual figures may deviate slightly from the total figure presented.
Financial targets
Kemira aims for above-market revenue growth, with an operative EBITDA margin of 15-18%. The target for gearing is below 75%.
Financial reporting schedule 2024
Half-year financial report January-June 2024 July 17, 2024
Interim report January-September 2024 October 25, 2024
Capital Markets Day 2024
Kemira's Capital Markets Day will be arranged on September 26, 2024. Kemira will give an update on the strategy's next steps and also on the financial targets in conjunction with the Capital Markets Day.
Webcast and conference call for analysts, investors and media
Kemira will arrange a webcast for analysts, investors and the media on Friday, April 26, 2024, starting at 10.30 am EEST (8.30 am UK time). During the webcast, Kemira's President & CEO, Antti Salminen and CFO Petri Castrén, will present the results. The webcast will be held in English and can be followed at kemira.com/investors. The presentation material and a recording of the webcast will be available on the above-mentioned company website.
You can attend the Q&A session via conference call. You can access the teleconference by registering on the following link: http://palvelu.flik.fi/teleconference/?id=10010851
After registration you will be provided with phone numbers and a conference ID to access the conference. If you wish to ask a question please dial *5 on your telephone keypad to enter the queue.
For more information, please contact:
Kemira Oyj
Mikko Pohjala, Vice President, Investor Relations
Tel. +358 40 838 0709
mikko.pohjala@kemira.com
Kemira is a global leader in sustainable chemical solutions for water-intensive industries. Our customers include industrial and municipal water treatment operators, and pulp & paper industry among others. We provide the best-suited products and services to improve our customers' product quality, process, and resource efficiency. Our focus is on water treatment, renewable solutions, and digital services. In 2023, Kemira had annual revenue of around EUR 3.4 billion and around 5,000 employees. Kemira shares are listed on the Nasdaq Helsinki Ltd. www.kemira.com
